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Two analysts and top management from eleven sector firms examine the Healthcare sector in this special 51-page issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info438.htm

TWST: How long has this been a significant area for investment?

Mr. Baker: I would say in the early stages it was largely overlooked. Awareness increased over the last two years as the government has been working on ways to provide senior citizens more affordable access to prescription drugs and has indicated that the pharmacy benefit managers will play a key role.

TWST: That would be a tremendous catalyst for these companies.

Mr. Baker: Yes, it would be, because senior citizens represent a greenfield opportunity for the pharmacy benefit managers and they are heavy users of prescription drugs.

TWST: I’d like to come back to that senior discount drug card a little later. But as far as the benefit processing companies are concerned, they’ve been around longer, haven’t they? ADP, for example --

Mr. Baker: Automatic Data Processing (NYSE:ADP) has a long history in the payroll business, which consists of processing as well as money movement expertise. Just to give you a sense of the opportunity, one company, ProBusiness (Nasdaq:PRBZ), currently derives about 70 to 80 per employee per year for processing payroll and tax. The opportunity is to increase that figure to 300 per employee per year by processing benefits. 150 of the 300 is associated with health care.

TWST: Do investors regard the pharmacy benefit managers as healthcare companies or as outsourcing plays? And similarly, with the benefit processors, are they business services or are they outsourcing plays?

Mr. Baker: The pharmacy benefit managers are viewed as healthcare plays. The payroll/benefits processors are placed in the following categories: information processing, outsourcing and business services.

TWST: What are the trends that you’re watching most closely, and how will they benefit the growth of these companies going forward?

Mr. Baker: The first trend that impacts the pharmacy benefit managers is that drug costs continue to rise faster than health care in general. If you take a look at physicians services as well as hospital costs, pharmacy costs are rising three to four times faster. So when you talk to a human resource manager or you speak to a managed care organization, it’s what they would refer to as enemy number one. Pharmacy cost containment is extremely important to them. Pharmaceuticals are the lowest cost way to treat an illness and they certainly have become the first line of defense against disease. But even recognizing that, corporations, government entities and managed care organizations continue to look for ways to spend money more efficiently.

TWST: And then there's ProBusiness Services.

Mr. Baker: ProBusiness is an interesting company, because although they are a late entrant into the payroll business, management has been successful in penetrating a market dominated by large, long standing companies such as ADP and Paychex (Nasdaq:PAYX). ProBusiness accomplished this by providing a higher level of service through their PC-based technology. The company has many well-known corporations as clients. Although they're losing money, these large customers would not put their payroll function in the hands of a company that they thought wouldn't be around long.

TWST: How long is it going to take for ProBusiness to become profitable?

Mr. Baker: They're in the process of trying to move toward profitability. The next couple quarters will be critical for them in demonstrating to the Street that they can rein in client acquisition costs and accomplish their goal.

This special issue includes:

1) Investing in Healthcare Funds - In an in-depth (3,800 words) Analyst Interview, Mariola B. Haggar, President, General Partner and Portfolio Manager at Haggar Concord Partners, LP, examines the outlook for the sector and shares specific stock recommendations.

2) Healthcare Benefits Management/Outsourcing - In an in-depth (3,800 words) Analyst Interview, Michael J. Baker, Health Care Services Analyst focusing on benefits management/outsourcing at Raymond James & Associates, examines the outlook for the sector and shares specific stock recommendations.

3) CEO interviews (average 2,500 words). Top management of eleven sector firms examine the outlook for their firm and the sector.